Subject to questions

[Nickolas Graham]

Hey BP Community,

I am looking to get some advice on how a subject to deal works. Let's say I have a person who is willing for me to take over their payments and sign the deed over to me. What is the best way for me to protect myself since the bank/ lender can call the note at any time? Also, wondering how I can structure payments to both the lender and insurance since it's technically not in my name? Are there 3rd party companies I can hire to handle payments?

[Brenden Mitchum]

Hey @Nickolas Graham, welcome to the BP Community!

The short answer is that you really cannot fully control whether or not the loan is called due. That being said, the last thing a bank wants is a foreclosure to occur on a performing asset. They're in the business of lending, not property ownership. Unfortunately, even though the chance of this happening is so small, the repercussions are fairly significant. The best way to protect yourself is to have a worse case scenario plan, which will likely involve a refinance. 

As far as the payments, most systems are online these days so you can simply change over login info to give you full control. You should absolutely have your own insurance though, rather than assuming theirs.

Really the hardest part is just getting your mindset right when it comes to that due on sale clause. There are very few strategies out there that are more profitable and carry similar or lower risk as less profitable strategies. @Mitch Messer, have you heard of anyone involved in a Sub2 deal that had the loan called due? Any advice for Nickolas on protecting himself?

Hope this helps a bit. Please, feel free to reach out anytime if you have other questions or just want to chat!